“It’s essential to have a continuous improvement model with embedded flexibility.”
There are five lines of business that will define EDS today and going forward into the next five years: 1. we will continue to play a major role in the systems technology management arena that’s outsourcing, systems integration, development and maintenance, 2. we’re also building a robust business process management business that’s supply source, teleservices, data mining and warehousing, imaging, environmental and safety, and logistics, 3. consulting, 4. cosourcing is a distinct line of business, and 5. electronic markets card processing, electronic funds transfer, EDI, and internet/ intranet in some ways actually being a direct participant as opposed to a supplier.
On Where Outsourcing Is Heading
I think outsourcing as a generic offering represents a high growth market for all those in the services industry moving beyond the IT services industry. I would say any function is eligible; you just have to put some type of screen in place to determine what should be outsourced. That screen could be capital intensive. It could be where do you benchmark versus the best in the industry. It could be the amount of intellectual capital that’s needed to be resident within your organization versus what could be transferred in from somebody else. It could be closeness to the customer† do you feel comfortable with your outsourcer dealing directly with your customer, or should they be one removed from the customer. It could be kind of value added is there a unique value added that comes from outsourcing that particular function.
Some people have tried to use “Cosourcing” as a friendlier way to contract. That was not the definition that EDS had in mind when we service marked and coined it. We think that in terms of the IT services industry, cosourcing is very focused on business performance. If you think back in the industry, outsourcing is primarily directed toward IT efficiency and performance improvement. We wanted to play on a broader field and position cosourcing as being directed toward business performance. It may have a technology underpinning, but it’s really towards dramatically improving the business metrics under which a corporation operates.
On Making A Relationship More Flexible
At minimum, you have to have the same flexibility your client had with in-house capability. And it’s essential to have a continuous improvement model with embedded flexibility. That is what you need to focus on, not an adversary relationship that’s going to be rebid every two years. One way to address the continuous improvement issue is to start benchmarking where you are today. In too many cases, no one takes the time to benchmark the performance standards that exist the day the relationship starts. Then three years later when you get into the topic of continuous improvement, you always look at things fonder in the past. So I think benchmarking is absolutely crucial as well as determining the measures. The key is when you’re talking measurement and continuous improvement, it has to be against things that can impact your relationship. It can’t impact the revenue. It can’t impact a lot of things. You really have to focus in on measurable items.
On Considering Outsourcing
Have a clear definition of what you want to achieve in that particular function not necessarily what you want to achieve with the outsourcer, but what do you want to achieve for that function. And then there are a number of benefits that you hope to get one may be cost savings, one may be flexibility, one may be speed to market. But it’s a combination that has to balance all those together.